Last month, Facebook announced plans to enter the financial sector with its Libra cryptocurrency and Calibra digital wallet service. By doing so, the social media service intends to take advantage of the lucrative remittances market. In 2018, the World Bank estimated first world nations transferred $529 billion to lower-income countries.
However, despite its resources, the corporation will likely have trouble competing with established remittance-focused firms. For instance, a billion-dollar money transfer startup called Remitly just raised $220 million to expand its operations. Now, with its new capital and thoughtful leadership, the firm is on track to become a major player in the remittance sector.
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The Seattle-based company secured its latest cash injection from outside investments and by taking on new debt.
The startup received $135 million from Generation Investment Management, the firm founded by Vice President Al Gore. Lucia Rigo, one of Generation’s growth equity directors, told TechCrunch her organization invested in Remitly for a few reasons.
First, the startup’s healthy growth rate was appealing. Indeed, market analysts valued the company at $170 million in 2016. With its latest funding round, the company is now valued at between $950 million and $1 billion.
Additionally, Generation appreciates the firm’s interest in providing money transfer services to migrants and immigrants.
Since its founding, Remitly has positioned itself as a disruptor within the money transfer sector. The startup understands that individuals who are sending money back home to vulnerable family members can’t afford high transaction fees. As such, the company appeals to its target demographic by eschewing costly physical infrastructure to offer robust online services.
Presently, Remitly provides low-cost remittance transfers from 16 sending nations to 44 receiving countries via 700 different corridors. Moreover, with its new Series E funding, Remitly can facilitate further upward mobility for individuals living in impoverished regions.
The startup also took on $85 million in debt to enhance and expand its services. Thanks to firms such as Barclays, Goldman Sachs, and Bridge Bank, Remitly now has the capital to expedite money transfers. CEO and Founder Matt Oppenheimer said that the company would use its new resources to pre-fund express transactions.
Oppenheimer also noted that Remitly is developing financial services for migrants and immigrants who lack credit history or bank accounts. However, the executive didn’t mention any plans to incorporate blockchain technology into its range of services. As such, the startup is unlikely to encounter the regulatory pushback that Facebook is facing with Libra.
Indeed, by focusing on improving its core products and diversifying its offerings, instead of reinventing the entire financial sector, the startup is setting itself up for great success in the future.